Mesaieed Petrochemical Holding (MPHC), one of the region’s premier diversified petrochemical conglomerates, has reported a net profit of QR1.2bn in 2019 and recommended 7% cash dividend.
However, there was a slowdown in net profitability, reflecting declining selling prices and sales volumes.
“In a difficult market, we successfully navigated challenging macroeconomic headwinds to increase operational reliability and efficiency, while laying the groundwork for future growth," said Ahmad Saif al-Sulaiti, MPHC chairman.
Global economic uncertainty, slowing gross domestic product growth and trade conflicts all weighed on demand for MPHC products, with a rising surplus capacity, which created an imbalance in supply-demand dynamics and pressured the group’s product prices, the company said.
The petrochemicals segment reported revenue of QR2.2bn and net profit of QR874mn. Revenue and earnings were mainly impacted by the 16% drop in selling prices, due to softening demand for its products in key markets, combined with overcapacities in various regions, which created an ‘imbalance’ in supply-demand.
During 2019, production dropped 2%, which led to a proportionate decline in sales. The drop in production volumes resulted primarily from maintenance shutdowns, which are necessary to maintain plant life and ensure HSE standards.
Revenue in the chlor-alkali segment shrank 21% to QR680mn, mainly attributed to the 13% decrease in selling prices, with sales volumes also declining by 9%. Selling prices and sales volumes fell amid macroeconomic slowdown, which affected the industry globally.
Nevertheless, the segment reported a 94% jump in net profit to QR274mn as operating costs fell and the company executed additional feedstock supply agreements with international suppliers on terms that were favourable given the prevailing market conditions. The effects of the tax exemption for the full-year of 2019 also had a positive effect on profits.
Liquidity remained robust throughout the year and the group’s balance sheet strengthened. Cash held by MHPC (including proportionate share of joint ventures) at the end of 2019 reached QR1.8bn and total assets stood at QR15.5bn.
"Entering 2020, we remain focused on our five-year business strategy to strengthen MPHC’s market position, while driving cost optimisation and generating improved shareholder value,” al-Sulaiti said.
Looking to the future, Q-Chem shareholders approved an expansion of the venture’s ethylene production. Upon completion in 2022, the sixth furnace project will provide a sustained about 7% jump in ethylene production, better utilising its existing derivatives production capacity.
With an estimated investment of QR391mn, the expansion is expected to generate positive capital returns and increased operational flexibility.
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